An Economic Role Reversal in Europe

By Kindred Winecoff

This is a shocking sentence from the New York Times:

It has come to this: Germany will almost certainly have a bigger budget deficit next year than Italy will.

In fact, Italy isn't the only EU country showing more restraint than Germany:

“There is something really odd going on here, with Italy being more prudent, Spain getting more serious and even the French talking about pension cuts,” said Gilles Moëc of Deutsche Bank. “Germany is the odd one out.”

Of course, inflation has traditionally been a more salient concern in Germany than budget deficits. And, despite Frankfurt's influence in the ECB, it will likely not be able to jigger the Euro to get out of budget problems. But with debt pressures mounting all over Europe, the coming months might put more pressure on the Euro and ECB than ever before.

Comments

[bob adamson:]

Neither the Social Democrats nor the Christian Democrats (including their Bavarian sister party) which have led Germany for the last generation had a supply side agenda. The Free Democrats during that period included free market advocates who were open to such an agenda but they did not really count when the Free Democrats were minority members of national governing coalitions in Germany in the past. It appears that things will be different in the new Christian Democrat and Social Democrat coalition that has just assumed office.

Arguably, even if one is persuaded by the logic of supply side economic analysis (and I am a skeptic), Germany is the wrong country and now is the wrong time in which to try these policies with any hope of real success.

Nov 13 08:11 PM

[test213:]

Yes, it is an interesting development. But Germany continues to be the strongest economy in Europe.

But the Scandinavians are also getting stronger economically and may start driving the European growth.

Time will tell.

test213
admin: invetrics.com

Nov 16 08:44 PM

[jpaech:]

b. adamson....should be:......things will be different in the new
Christian Democrat and Free Democrat coalition??

Nov 17 11:15 AM